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Abstract

The present article estimates the extent to which participation in Farm Inputs Subsidy Program (FISP) crowds-out/in fertilizer sales among private sector retailers in Malawi. Malawi implemented FISP reforms during 2015/16 season that allowed certain larger-scale fertilizer distributors to sell FISP fertilizer at their retail outlets in select districts on a pilot basis while smaller-scale agro-dealers were excluded. We use a unique panel dataset of fertilizer retailers collected before and after the policy change to measure supply-side crowding-in/out impacts of the FISP. Using a difference-in-differences estimator we are able to obtain a causal measurement of how the policy change affects fertilizer sales for retailers who participated in the program and those who did not. Results indicate that distributors who sold the FISP fertilizer experienced a 299 Mt increase in the volume of total fertilizer sales, on average. Conversely, agro-dealers who were excluded from participating in the pilot program experienced a 28 Mt decline in their fertilizer sales, on average. This suggests that the reforms have mainly benefited distributors who sell 90% of the fertilizer in Malawi, but caused some harm to the many agro-dealers who sell 10% of Malawi s fertilizer, but also conduct their businesses in more remote areas. Acknowledgement : The research team gratefully acknowledges the Gates Foundation Global Development Programme for the financial support towards research on issues surrounding Malawi s Farm Input Subsidy Programme (FISP) under a project titled Guiding Investments in Sustainable Agricultural Intensification in Africa (GISAIA). This was a collaborative research project involving the Lilongwe University of Agriculture and Natural Resources (LUANAR-Malawi), Purdue University (USA) and Michigan State University (USA) that has provided useful policy information for the Government of Malawi. Views expressed herein do not represent that of the Gates Foundation and all errors and omissions rests with the authors.

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